Friday, March 19, 2010

Up, Up & Away

Good news. From February 2009 to February 2010 the average California home price increased by 11%! Analysts attribute this to a decrease in California foreclosures and an increase in high-end sales. This is not just of interest to consumers, but to banks as well. Banks have stronger assets, as the loans they wrote last year are worth less than the assets that secured them. In other words, banks have had such a rough patch because mortgages are secured by real estate. If that real estate loses value, then the mortgage has not guaranteed way of being repaid. On the flip side, when a bank forecloses on a home that has a higher value than the outstanding debt, it can still recover the balance of the mortgage or even a profit.

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